(Image Credit: Ericsson)
Swedish telecommunications leader Ericsson has reported disappointing first-quarter sales and announced a renewed focus on restructuring to capture new opportunities and improve growth and profitability in the years ahead. Hans Vestberg, President and CEO of Ericsson, said: “We are not satisfied with our overall growth and profitability development over past years. We are today announcing further actions to accelerate strategy execution and to drive efficiency and growth across the company even harder.”
Over the last year, Ericsson’s sales fell by about two percent. The company attributes this decline to weak performance in Europe and challenging macroeconomic conditions in several emerging markets. While sales increased in North America, Mainland China and Southeast Asia, those gains were insufficient to offset declines elsewhere and deliver positive year-over-year net sales growth.
Ericsson is moving now to make organizational changes so it can more quickly seize opportunities tied to 5G, the Internet of Things and cloud services. The company says it will become leaner and better aligned with the needs of distinct customer segments in order to capture market opportunities faster. “As 5G, the Internet of Things, and Cloud drive the next phase of industry development, the time is just right to make these changes,” the company stated.
|
SEK b. |
Q1 |
Q1 |
YoY |
Q4 |
QoQ |
|---|---|---|---|---|---|
|
Net sales |
52.2 |
53.5 |
-2% |
73.6 |
-29% |
|
Sales growth adjusted for comparable units and currency |
– |
– |
-1% |
– |
-28% |
|
Gross margin |
33.3% |
35.4% |
– |
36.3% |
– |
|
Gross margin excluding restructuring charges |
33.9% |
36.3% |
– |
36.6% |
– |
|
Operating income |
3.5 |
2.1 |
63% |
11.0 |
-69% |
|
Operating income excluding restructuring charges |
4.1 |
2.7 |
50% |
11.7 |
-65% |
|
Operating margin |
6.7% |
4.0% |
– |
15.0% |
– |
|
Operating margin excluding restructuring charges |
7.9% |
5.1% |
– |
16.0% |
– |
|
Net income |
2.1 |
1.5 |
45% |
7.0 |
-70% |
|
EPS diluted, SEK |
0.60 |
0.40 |
50% |
2.15 |
-72% |
|
EPS (Non-IFRS), SEK 1) |
0.87 |
0.77 |
13% |
2.50 |
-65% |
|
Cash flow from operating activities |
-2.4 |
-5.9 |
-60% |
21.9 |
-111% |
|
Net cash, end of period 2) |
36.5 |
39.7 |
-8% |
41.2 |
-11% |
1) EPS, diluted, excluding amortizations and write-downs of acquired intangible assets, and restructuring.
2) The definition of Net cash has been changed to exclude post-employment benefits; see accounting policies.
Ericsson has identified three priority areas: strengthening the core business, improving profitability in targeted growth segments, and cutting costs while boosting efficiency. In the first quarter the company achieved efficiency savings of 500 million kronor and says it plans significantly larger reductions over the next year. Ericsson expressed confidence in reaching net annual savings of nine billion kronor in 2017 compared with 2014.
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